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Saturday, July 13, 2013

A World of Vulnerability

by Jomo Kwame Sundaram

ROME – In 2010, global leaders achieved the Millennium Development Goal (MDG) of reducing the share of the world’s poor to half of its 1990 level – five years ahead of schedule. But rising unemployment and falling incomes underscore the enduring threat of poverty worldwide. After all, poverty is not an unchanging attribute of a fixed group; it is a condition that threatens billions of vulnerable people.

Illustration by Paul Lachine

Despite their shortcomings, income measures are useful in gaining a better understanding of the extent of poverty and vulnerability worldwide. But the World Bank’s poverty line of $1.25 per day (in purchasing-power-parity terms), which is used in measuring progress toward the MDGs’ poverty-reduction target, is not the only relevant threshold. When the poverty line is raised to per capita daily spending of $2, the global poverty rate rises from 18% to roughly 40%, suggesting that many people are living just above the established poverty line, vulnerable to external shocks or changes in personal circumstances, such as price increases or income losses.

Three-quarters of the world’s poor live in rural areas, where agricultural workers suffer the highest incidence of poverty, largely owing to low productivity, seasonal unemployment, and the low wages paid by most rural employers. In recent decades, vulnerability and economic insecurity have increased with the rise of transient, casual, and precarious employment, including self-employment, and part-time, fixed-term, temporary, and on-call jobs. At-home positions, frequently filled by women, are also on the rise.

Labor-market liberalization, globalization, and unions’ declining influence have exacerbated these employment trends. At the same time, macroeconomic policies have focused on achieving and maintaining low-single-digit inflation, rather than full employment, while limited social protection has heightened economic insecurity and vulnerability.

During the East Asian crisis of 1997-1998, poverty rose sharply. For example, Indonesia’s poverty rate soared from roughly 11% to 37% during the crisis, mainly owing to the massive depreciation of the rupiah.

Likewise, following the 2008 global economic crisis, food-price spikes and recession caused the United Nations Food and Agriculture Organization to revise its hunger estimates upward, to more than one billion people. Considering the FAO’s conservative definition of chronic severe hunger, this is a serious indictment of global poverty-reduction efforts.

Most poor adults in developing countries have to work, if only to survive. Aside from the working poor, an additional 215 million workers worldwide slipped below the poverty line in 2008-2009, owing to the Great Recession. Another 5.9%, or 185 million workers, were living on less than $2 per day. The estimated 330 million working women who lived below the poverty line in 2008-2009 accounted for roughly 60% of the 550 million working poor worldwide.

New estimates by the International Labor Organization (ILO), based on a different methodology from that used by the World Bank, demonstrate that, while the number of those classified as working poor worldwide declined by 158 million from 2000 to 2011 (from 25.4% of workers to 14.8%), progress has slowed markedly since 2008. Indeed, only 15% of workers, or 24 million people, managed to rise above the poverty line in 2007-2011. The other 134 million workers who escaped poverty did so earlier, in 2000-2007. As a result, there were 50 million more working poor in 2011 than projected by pre-crisis trends for 2002-2007.

The lack of basic social protection in most countries exacerbates vulnerability. The ILO World Social Security Report found high or very high vulnerability, in terms of poverty and labor-market informality, in 58 countries, mainly in Africa and Asia. Most such countries do not provide unemployment insurance, while more than 80% of their populations lack social-security coverage and access to basic health services.

Indeed, few countries currently provide comprehensive social protection, as defined by ILO Convention 102 (the instrument establishing internationally-agreed minimum social-security standards). According to the ILO, only one-third of countries worldwide – accounting for roughly 28% of the global population – provide all nine types of protection, meaning that only about 20% of the world’s working-age population (and their families) enjoys comprehensive coverage.

Although all countries offer some kind of social protection or security, in most countries, coverage is severely limited and targeted at specific groups. As a result, only a small minority of the global population has full, legally guaranteed access to existing social-protection schemes – leaving roughly 5.6 billion people worldwide vulnerable to various degrees.

Vulnerability exists at levels far above the World Bank’s $1.25/day poverty threshold, especially given rising job insecurity and inadequate social protection worldwide. To address global poverty effectively, global leaders must take a more comprehensive approach that focuses on reducing citizens’ vulnerability.